Can employees owed back wages, file priority status claims against owners personal bankruptcy case?

Asked 7 months ago - Northfield, OH

This is in the state of Ohio. The sole owner of a sub chapter S Corporation (which has not been doing business for several years) has filed personal bankruptcy (chapter 7). He owes several former employees back payroll. Are the former employees entitled to file a priority status claim for unpaid wages against the owners personal bankruptcy case.? Or, is the owner not liable for the wages due, because this is a personal bankruptcy case and he is protected by the sub chapter S corporation ?

Attorney answers (3)

  1. Scott Benjamin Riddle

    Pro

    Contributor Level 20

    5

    Lawyers agree

    Answered . Unless there is something to make the owner personally liable for the company debts (an OH lawyer can weigh in), then it is not his personal debt and not a valid claim in the case. Moreover, priority wage claims are limited so if the wages are from several years ago they would not have priority status even in a Bankruptcy case of the company.

  2. Richard D. Granvold

    Pro

    Contributor Level 18

    5

    Lawyers agree

    Answered . First, unless the court has sent out a notice to file a proof of claim in the case it does not matter as most cases are no asset cases.

    Second, the issue has to do with the law governing the corporations status. THE owner has the fiduciary duty to use the corporations assets for the benefit of its creditors. Many corporations go "under". They do NOT have to file a bankruptcy because the liabilities are not discharged in chapter 7 by a corporation. If there are no assets left then there is nothing else to do to enforce any claims against the corporation. However, if the corporation did in fact have assets you could pursue a claim against it..but if the assets are now listed as assets in sole owners bankruptcy then you could file a claim that you have a right to such assets ahead of NON CORPORATE creditors.

    In light of all the above, if the 341 meeting has not yet occurred, you might go and ask what assets did the corporation own when it stopped doing business,, which of those are still owned today, are they listed in Schedule B of the sole owners personal BR and ask if so, "How come you did not sell those for the benefit of the corporate creditors?".

    After all the above, you might determine it is not worth paying an attorney to pursue any claims any further. Have a great weekend and I hope I have helped you take action that is reasonable in light of the value of any claims and assets of the corp!

  3. Dorothy G Bunce

    Pro

    Contributor Level 20

    3

    Lawyers agree

    Answered . Who employed you - the company or the individual? What was the period for which you were owed wages? If more than 180 days ago, the debt is NOT a priority claim but a general unsecured claim. Do not file a claim unless you are 100% sure of the nature of your case because a bad claim will be denied and there is a penalty for filing a false claim. Hope this perspective helps!

Related Topics

Small business s-corporation

An S corporation does not pay federal income taxes, instead passing its income, losses, deductions, and credits through to its shareholders.

Bankruptcy

Bankruptcy is a legal way for people or businesses who are no longer capable of paying back their bills to clear these debts and start over.

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